VERISIGN INC/CA Q3 FY2024 earnings call

• Delivered operational and financial stability, extending 27 years of 100% uninterrupted availability for the common net domain name resolution system. • Revenue grew 3.8% YOY, operating income 5.9% YOY, EPS 13.1% YOY. • U.S. registrars prioritizing ARPU over customer acquisition impacting new registrations and renewal rates. • China-related weakness continuing to affect results. • Developing and piloting new registrar marketing programs, but adoption takes time, with return to domain name base growth possibly challenging in 2025. • ICANN posted revised com registry agreement for public comment, renewal process expected to complete by November 30; discussions with NTIA on dotcom pricing and ecosystem health ongoing. • Financial results for Q3 2024: revenue $391M, operating income $269M, net income $201M, diluted EPS $2.07, operating cash flow $253M, free cash flow $248M.

For the third quarter, revenue was $391 million, up 3.8% year-over-year. Operating income was $269 million, an increase of 5.9% year-over-year. Earnings per share grew 13.1% year-over-year. At the end of September, the domain name basin dotcom and dot net totaled 169.6 million domain names. The domain name base decreased by 1.1 million names during the third quarter. New registrations were 9.3 million compared with 9.9 million in the same quarter last year. The renewal rate for Q3 2024 is expected to be approximately 72.3% compared to 73.5% a year ago. The U.S. region was lower by approximately 850,000 names, China-related weakness contributed to most of the remaining decline, while the EMEA region was up nearly 200,000 names.

• Full year 2024 guidance: revenue between $1.554 billion and $1.559 billion, operating income between $1.054 billion and $1.059 billion, interest expense and net non-operating income between $32 million and $42 million, capital expenditures between $25 million and $35 million, GAAP effective tax rate between 21% and 24%.

• China-related weakness continuing to impact new registrations and renewal rates. • U.S. registrars prioritizing ARPU over customer acquisition affecting domain name base growth. • Time required for registrars to adopt and integrate new marketing programs, potentially delaying return to domain name base growth.

Q: Rob Oliver asked about channel marketing efforts, growth into 2025, ARPU, and China-related impact.

A: Jim Bidzos and George Kilguss responded that registrars are not engaging quickly with new programs, slipping growth into 2025; U.S. registrars focusing on ARPU via retail prices, aftermarket sales, and reduced marketing spend; China-related weakness persisting; marketing programs to be accretive and adjusted based on success.

Q: Max Moore asked about capital allocation, buybacks, and marketing initiatives.

A: Jim Bidzos and George Kilguss discussed buyback pace, stating they evaluate methods based on plans; George mentioned expecting expenses to grow more in 2025, marketing programs to be accretive and adjusted accordingly.